Universal Credit a headache of rent arrears for landlords?

The planned introduction of Universal Credit has caused consternation among private landlords.;

A survey conducted jointly by the Residential Landlords Association (RLA) and Scottish Association of Landlords (SAL) has revealed dissatisfaction among landlords in the private rental sector with the planned introduction of Universal Credit as part of the Welfare Reform Act 2012, which received royal assent earlier this year.

The survey took place between 22 October and 5 November and the results were released on 6 November to coincide with the National Landlords Day Conference in Edinburgh. 1,023 private landlords were surveyed in total.

Among the points raised that single tenants under the age of 35 are now only entitled to the ‘shared accommodation rate’ of housing benefit – the cost of a single room in shared accommodation – as of 1 January this year (the age having risen from 25). Over half of landlords feel that the supply of shared accommodation in their area will not meet the extra demand that this will cause.

Those surveyed also expressed displeasure with a temporary scheme, implemented in April, which allowed landlords to receive housing benefit payments directly from local authorities in return for lowering rents to ‘affordable levels’. When asked if they would consider lowering rents in order to receive direct payment, 62.3% of landlords said that they would not.

The main concern raised seemed to be regarding the lack of assurance that landlords would retain the right to demand that rent be paid directly to them. Currently landlords may make this demand if their tenant’s rent is in arrears of eight weeks or more.

The director of the Scottish Association of Landlords, John Blackwood, said:

“It is clear that the uncertainty around the Government’s plans for universal credit is having a damaging impact on the private rented sector.

“Tenants on benefits need protections in place to ensure their rent is paid when things get difficult, whilst landlords need assurances that rent arrears won’t mount up. The basis of trust upon which the sector depends is being eroded by the Government’s plans.”

Summary of statistics

91.6% of landlords (932 of 1,018 respondents) said that they would be less likely to let to benefit claimants if the ‘right to demand’ direct housing benefit payments became a ‘right to request’ (2.3% answered ‘more likely’; 6.1% answered ‘neither’)

62.3% of landlords (636 of 1,021 respondents) said that they would not be prepared to lower rents in order to receive direct housing benefit payments (23.9% answered ‘yes’; 13.8% answered ‘don’t know’)

54.6% of landlords (557 of 1,020 respondents) do not believe that there is sufficient shared accommodation in their area to meet growing demands (6.2% answered ‘yes’; 39.2% answered ‘don’t know’)

65.2% of landlords (662 of 1,016 respondents) do not support proposals for a Universal Credit (15.2% answered ‘yes’; 19.6% answered ‘don’t know’)

This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.